REMINDER: All investment, economics, and finance related material now appears at the new IaconoResearch.com. For the time being at least, this has become a personal blog covering a variety of mostly unrelated topics.

More Furloughs and IOUs in California

The Sacramento Bee reports that California’s furlough program, a measure aimed at helping to shrink a state budget shortfall now estimated at $19 billion, survived its latest court challenge and, for the next few weeks or so, government offices will be quiet on Fridays.

State workers endured the latest tortuous turn in an off-again-on-again furlough saga that has left roughly 144,000 of them uncertain from week to week of their work schedules.

But the California Supreme Court’s decision Wednesday to side with Gov. Arnold Schwarzenegger and allow furloughs to start again Friday should be the last twist – at least until next month.

“The result of the California Supreme Court ruling today means that the furloughs will continue until the court says otherwise,” Schwarzenegger spokesman Aaron McLear said, adding that furloughs also will stop if the state budget is approved.

Otherwise, he said, “furloughs will continue as planned Friday the 20th, the 27th, and one additional floating furlough between now and the end of the month.”

Schwarzenegger ended a similar policy in June, but with state lawmakers at an impasse over how to close a $19 billion budget deficit, the Republican governor issued an executive order July 28 restarting the policy as a way to save $136.7 million per month in payroll costs, about $75.5 million for the general fund.

In related news, State Controller John Chiang said that the government will begin issuing IOUs in two to four weeks unless the legislature approves a budget. The state previously issued IOUs in 1983, 1992, and 2009, the back-to-back issuance this year further evidence that the state is nearly impossible to govern during recessions.

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What Doesn’t Kill You Makes You Stronger?

Der Spiegel reports on how Greek society is adapting to the many “austerity measures” that have been enacted in recent months. It sounds as though the painful (yet much needed) lowered expectations of what government can and should provide are well underway.

The austerity measures that were supposed to fix Greece’s problems are dragging down the country’s economy. Stores are closing, tax revenues are falling and unemployment has hit an unbelievable 70 percent in some places. Frustrated workers are threatening to strike back.

The government’s draconian austerity measures have managed to reduce the country’s budget deficit by an almost unbelievable 39.7 percent, after previous governments had squandered tax money and falsified statistics for years. The measures have reduced government spending by a total of 10 percent, 4.5 percent more than the EU and International Monetary Fund (IMF) had required.

The problem is that the austerity measures have in the meantime affected every aspect of the country’s economy. Purchasing power is dropping, consumption is taking a nosedive and the number of bankruptcies and unemployed are on the rise. The country’s gross domestic product shrank by 1.5 percent in the second quarter of this year. Tax revenue, desperately needed in order to consolidate the national finances, has dropped off. A mixture of fear, hopelessness and anger is brewing in Greek society.

They go on to provide a number of anecdotal accounts about how life has changed for both individuals and communities with conditions not likely to improve any time soon given that massive layoffs are expected this fall.

(more…)

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Homeowner Confidence Dips

The latest Zillow survey of homeowners reveals that many of them seem to have been reading the newspapers in recent months, aware of the impact that slowing economic growth and the end of the homebuyer tax credit are likely to have on property values.

The report notes that 38 percent of homeowners think that their local market has already seen a bottom in prices but that 30 percent think prices will go lower.

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Weekly Jobless Claims Reach 500,000

Well, it looks like we’re about to find out how equity markets react “when” weekly claims for unemployment insurance reach 500,000, the question of “if” no longer being relevant. According to this AP report, so far, not so good, that is, if you’re long.

Stock futures drop as jobless claims rise

Stock futures fall after claims for unemployment benefits rise unexpectedly

Stock futures are falling after a disappointing report on weekly claims for jobless benefits.

The Labor Department says initial claims for unemployment benefits jumped by 12,000 to 500,000 last week. Economists were expecting a small drop in claims. That renews worries about the pace of a recovery.

The jump in the number of people filing for unemployment benefits helped wipe out a sharp rise in futures Thursday that occurred following news that Intel Corp. is acquiring McAfee Inc.

It should be an interesting day… Leading economic indicators will be released in about an hour and more signs of slowing growth (if not an outright contraction) in manufacturing might be seen in the Philadelphia Fed survey.

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Global GDP Through the Millennia

The Economist had this fascinating chart up the other day detailing the history of global economic output as compiled by the late Angus Maddison whose calculation methods (in case you were wondering) may have died with him. Contrary to what most people might believe, robust economic activity hasn’t always been a European affair (see the Dark Ages).

Note that the stacked 100 percent chart format with a portion of it missing is somewhat misleading because, looking at it quickly, you might think that output 2,000 years ago was, somehow, comparable to what we see today after properly adjusting for one factor or another. Surely it is not. In fact, you’d probably find that up until the West began to dominate in the 19th century, there wasn’t a whole lot of GDP anywhere in the world.

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Thursday Morning Links

MUST READS
GM Share Offering Tests Investor Confidence – Bloomberg
BOJ considering additional easing steps: report – Reuters
What should we do about national debt, and when? – McClatchy
Greece meets criteria for next aid tranche: EU exec – Reuters
Boston Fed’s New Excuse for Missing the Housing Bubble – Naked Capitalism
Consensus Emerging for Future of Housing Finance – American Banker
The Myth of the Great Bond “Bubble” – Pragmatic Capitalism
Death and Joblessness – Washington Independent
America’s Most Stressful Cities 2010 – Forbes

MARKETS/INVESTING
Oil hovers above $75 amid tepid US economy – AP
Gold climbs towards $1,230 on growth concerns – Reuters
Hedge funds tap ETF for gold bets as stock correlation rises – MarketWatch
Citi: The bond-stock decoupling is quite the Conundrum – FT Alphaville
Why Success Is Much Harder Now for Hedge Fund Managers – CNBC
Strategists Sour Some More – Bespoke Investment Group

ECONOMY/WORLD/HOUSING/BANKING
Stop worrying about a double dip – CNN/Money
Western Economies Face Hyperinflation: Gold Bull – CNBC
Letter from China: Where the consumer is queen – CNN/Money
Vietnam Dong Slumps to Record Low as Adviser Warns of `Shock’ – Bloomberg
Tensions Rise in Greece as Austerity Measures Backfire – Spiegel Online
Homeowner Confidence Dips Again with News of Declining Home Sales – ZillowBlog
Sacramento-area home sales fall 29% in July from June – SacBee
Fed Officials All Over the Map in Explaining Policy Shift – WSJ
Some Econobloggers Visit the Treasury – Naked Capitalism
Will the Fed do more? – EconBrowser

 
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